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TheStreet.com Ratings: Model ETF Portfolio

Our ratings model takes a cautious view of domestic stocks. While the market is still up over the 12 months ended Feb. 28, the momentum is slowing. February's losses erased all the gains made in January.

You can blame it on falling home prices. You can blame it on a former Federal Reserve chairman's media-magnified comments. Or you can blame it on speculation in either Chinese stocks or the Japanese yen. The results are the same. The U.S. stock market seems to be pausing but still retains some positive aspects.

Our theoretical $10,000 portfolio of 10 exchange-traded funds illustrates this. In the period from Feb. 6 through Feb. 28, the portfolio lost 2.65%, in line with the major large-cap benchmarks. During the same period, the Dow Jones Industrial Diamonds (DIA) dropped 2.98%, while the S&P 500 SPDR (SPY) (SPY) fell 2.73%.

Domestic utilities, European value and Pacific Ex-Japan held up the best amid February's selloff, while capital markets, REITs and emerging markets were hit the hardest.

The positive highlight of the month was the ML Utilities HLDR (UTH). This ETF benefited from the news that private-equity investors were lining up for a $45 billion buyout of a core holding, Texas Utilities (TXU). On Feb. 26, the day the deal was announced, the fund gained 3%. It finished the period up 2.85%.


February ETF Trends Portfolio
Utilities and international non-emerging markets limit losses during downdraft
ETF Ticker Shares Price as of 2/6/2007 Beginning Value ($) Total Return for Period (%) Ending Value ($)
IShares MSCI VLU IDX EFV 14 73.63 1,030.82 -1.15% 1,018.97
IShares MCSI EAFE EX-JAP EPP 7 129.46 906.22 -1.12% 896.07
KBW CAPITAL MARKETS KCE 15 71.68 1,075.20 -7.31% 996.6
IShares S&P GL Telec IXP 14 65.4 915.6 -1.24% 904.25
IShares DJ Energy SC IYE 10 101.47 1,014.70 -2.82% 986.09
IShares MRGSR LGVLIX JKF 12 85.08 1,020.96 -2.97% 990.64
IShares MRGN SM Core JKJ 11 89.02 979.22 -2.30% 956.7
ML Utilities HLDR UTH 7 132.09 924.63 2.85% 950.94
Vanguard Real Estate ETF VNQ 12 85.48 1,025.76 -4.77% 976.83
Vanguard Emerg Mkt ETF VWO 14 79.04 1,106.56 -4.40% 1,057.87
Holdings Subtotal 9,999.67 -2.65% 9,734.95
Cash 0.33 0.00% 0.33
Total 10,000.00 -2.65% 9,734.95
Benchmark total returns:
SP500 (SPY) 144.89 -2.73% 140.93
Russell 2000 (IWM) 80.44 -2.00% 78.83
Dow Jones 30 (DIA) 126.65 -2.98% 122.66
(1) Total Return includes both price appreciation and accrued dividends.

Before we discuss our portfolio changes, a note on the chart above: We have relabeled the columns to make it clearer that our monthly performance numbers are based on total return, which includes both price appreciation and dividends. As we have said in the past, the monthly aggregate total return is based on the amount allocated to each investment. For this purpose we use 10 funds to cover a broad universe of investment options and markets allocating approximately $1,000 to each based on the actual market price and without using fractional share positions.
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